Ruling allows California to cut Medi-Cal payments

SACRAMENTO, Calif.  A federal appeals court on Thursday affirmed California's right to cut payments made to Medi-Cal providers by 10 percent, a victory that Gov. Jerry Brown's administration says will save the state more than $330 million a year.

The 9th U.S. Circuit Court of Appeals ruled that trial courts cannot block the state from making the cuts that were approved by the U.S. Department of Health and Human Services.

Doctors, pharmacists and other health providers who had sued to try to block the cuts immediately urged the state to reconsider reducing the payments made under the insurance program for the poor and disabled. The groups say they are evaluating their legal options for an appeal.

State lawmakers authorized cuts last year to save money, but a district court blocked the move. At the time it was passed, AB 97 was projected to save $660 million, with half the savings going to the state's general fund. Brown's finance officials say the state could see an additional one-time savings of at least $124 million in the general fund if the cut is applied retroactively to June 2011.

"Today's decision allows California to continue providing quality care for people on Medi-Cal while saving the state millions of dollars in unnecessary costs," said Brown's spokesman Gareth Lacy.

Dr. Paul Phinney, president of the California Medical Association, which represents 35,000 doctors, said the cuts will tragically hurt the access to care for millions of patients.

The association says ongoing cuts to Medi-Cal have left doctors with little option but to stop taking qualified patients because the reimbursements do not meet the cost of overhead and supplies to treat them.

"Our hope is that state officials and Gov. Brown can look at the situation and decide not to move forward with these cuts," Phinney said in a statement. "It was a tough budget decision that was made when the state was in a much more dire fiscal situation than it is now."

Health providers also voiced concern that the cuts will impact roughly 900,000 kids who are being moved next year from the children's health insurance program known as Healthy Families into Medi-Cal.

In addition, millions of new patients are expected to be eligible for Medi-Cal under federal health reform. The program currently serves 7.7 million Californians.